How to Save for a Car when You're Tight on Money

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - May 15, 2018

The best thing a potential car buyer can do is calculate their budget and save up the right amount of money. It takes time to come up with enough money for a vehicle when starting from scratch, but if a buyer follows these four steps, they’ll be closer to buying a car in no time.

Four Steps Toward Saving

When the time comes, here are four things a buyer should do in order to save up enough money to get financed for a car:

  1. Determine your monthly payment – Using their budget and online calculators, a buyer can determine just how much they can afford each month. Monthly payments vary by interest rates, loan principal or the cost of the vehicle, and loan term. Longer loan terms mean lower monthly payments, but typically have higher interest rates. Loan terms longer than 60 months put a buyer at risk of their vehicle being underwater for a longer period of time, so it’s strongly advised that buyers keep their loan term as short as possible. If money is tight, and the longer loan length’s monthly payments are more affordable, a buyer can choose to pay more each month once they’re able to do it.
  2. Set money aside for a down payment – Once a buyer has an estimated monthly payment they can afford, it’s time to budget for a down payment. When dealing with subprime lenders, there’s usually no getting around the down payment requirement. The minimum amount varies by lender, but is generally $1,000 or 10 percent of the vehicle’s selling price, whichever is less. If a buyer has a trade-in, they can use the equity toward the down payment requirement, too. One thing to remember: the more money a buyer puts down, the more they can save in the long run because they'll pay less in interest charges. Also, the buyer won't be as affected by their vehicle's depreciation, and their risk of being upside down will decrease. If possible, close to 20 percent down will help in the long run.
  3. Set a target purchase date – Having a set date or time frame helps a buyer prepare to save for a down payment. If they know it’ll take “X” number of months to save for “X” amount of dollars, this should keep them on track and decrease unnecessary financial stress. One good thing about setting a date for buying a car is the flexibility it allows if a buyer’s financial status changes during that time.
  4. Keep up with savings – Follow through on the savings schedule. Try not to alter the savings budget, if possible, and make sure to stay on track. When all is said and done, a buyer can use our car loan calculator to get an estimate for their next loan.

Bottom Line

One of the most difficult things when buying a vehicle is making sure you have a lender willing to work with you, no matter your credit situation. Here at CarsDirect, we can help start you on the path to a local special finance dealer that has the lending resources available for people in many challenging credit situations.

We work with a nationwide network of dealers that have lenders specializing in bad credit, no credit, bankruptcy, and even repossession. Take the first step toward rebuilding your credit and getting the car you need by filling out our auto loan request form today.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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